Is There Enough Demand For Two Natural Gas Liquids Pipelines Through Kentucky?

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Call it the Battle of the Pipelines.

For the past two months, I’ve been reporting on the Bluegrass Pipeline—a proposal to build a new natural gas liquids pipeline across Kentucky and Ohio to connect existing infrastructure. Now, another company has announced plans to re-purpose an existing natural gas line across the Commonwealth for the same type of materials.Energy companies Kinder Morgan and MarkWestannounced the project last week. It involves building a processing complex in Ohio to separate the gas that’s drilled in the Marcellus and Utica shales into methane and natural gas liquids. Then, those natural gas liquids would be transported to processing plants on the Gulf of Mexico to be manufactured into materials like plastics and synthetic rubber.

There’s one big difference between this new pipeline and the Bluegrass Pipeline: the newest proposal will repurpose part of Kinder Morgan’s Tennessee Gas Pipeline. That means the company doesn’t need to survey for the pipeline or reach easement agreements with landowners.

“That’s one of the benefits,” said Kinder Morgan spokesman Richard Wheatley. “That we already have an easement, we just need to file with appropriate agencies for conversion of the line.”

Support for WFPL comes from:

The Tennessee Gas Pipeline already stretches through Kentucky from Greenup through Morehead and Campbellsville to the Tennessee border. And while Wheatley says the company hasn’t started outreach to landowners yet, it’s likely they’ll face some of the same concerns Bluegrass Pipeline company Williams is: people worried about the hazards created by transporting natural gas liquids, from water and soil contamination to explosions. And of course, the affected people have granted easements for a natural gas line on their property, and may not be thrilled to learn the pipeline will be converted to carry natural gas liquids…materials like butane, ethane and propane. But the difference here is that Kinder Morgan already has the easement for the pipeline.

So, will both pipelines actually be built? The companies behind the dueling pipelines disagree about this.

The Bluegrass Pipeline was announced first. But in a recent earnings call, MarkWest CEO Frank Semple told analysts that he only thinks there’s room for one pipeline.

“[The Kinder Morgan/MarkWest project] absolutely competes with Bluegrass,” he said. “If you look at the volume projections out of the Utica and Marcellus, and clearly there’s a lot of variability in those forecasts, over the course of the next five years, you would expect that if there is a need for transporting the C2+ Y grade to the Gulf Coast, there’s probably only enough volume to support one of those two projects.”

(“Y grade” gas is NGLs.)

And it goes without saying that if MarkWest is pursuing this new pipeline, Semple thinks his project will be successful.

“I believe at least in the near term, that there really will be only one Y-grade pipeline project to the Gulf Coast developed out of the Northeast,” he added.

Williams company spokesman Tom Droege disagrees. He said in a statement that his company thinks there’s enough capacity for both pipelines.

“The joint venture announcement from Kinder Morgan and MarkWest Utica EMG is further evidence of the vast opportunities that exist in the Marcellus and Utica regions,” he wrote. “We have seen significant interest from the producer community regarding the value that the Bluegrass Pipeline can offer the market. If anything, the demand for these projects is greater than originally anticipated and we believe in the not too distant future that we’ll look back and wish we had more capacity available to the region.”